Big brother can be a good thing, could be welcomed, if big brother was good for the user. The way they talk about this is a one-way transfer of value from the blockchain to the treasury - in a time of massive fiscal reserve from bond purchases. They would get a stronger desire to pay taxes if they gave better investor protections. Right now, there are none. Zero. You get rich, you pay half. You lose your life savings to a hack or rug pull, you get a $3000 maximum deduction on zero income. If both happen, you still owe the first half, and you still get nothing for the second half. And nobody is going to help you get your money back. You can’t sue, you can’t do anything. The current rules make it easy to end up owing dollars you’ve never had, and this happens a lot.
The world of fiat is not perfect, but you pay taxes and you get the might of the US government behind your investments. Your assumptions of good faith can be backed up by jail time if you are deceived. There’s actually a choice about that. You could invest cash in illegal business that affords you no protection, but most people choose not to. Blockchain investments are crippled for US citizens on both ends, crime and taxes. The benefits of the open participation model are still compelling, just not as much.
It will take broad international standards on both crime and taxes to fix this, and get Americans onto even footing with the rest of the world. Right now, US citizens are at a disadvantage compared to world counterparts, unless you are big enough to set up a subsidiary in a ‘crypto-friendly’ tax country.
We tried this with the internet 30 years ago, but we did the opposite. The US was the most Internet-friendly country on earth. Regulators knew they were in a war for global market share. The result is unsurprising. We won. Everybody came here. China may have won mobile. There will be competition for crypto. Binance is currently homeless. All the biggest VC-backed projects were led by US residents that moved to Switzerland to avoid taxes, which is perfectly legal for them, but not for a US citizen. That tax advantage made them better investments. Being a US citizen is an investment liability. Apologies if this rubs you the wrong way, but, citizenship should be an advantage here, just as it is respectively everywhere else (maybe not China).
People should want to pay their taxes, right? They voted for it, right? It’s not that different from any business or charity, and if the cypherpunks are correct, there will come a time where one may freely choose which society to enjoy the befits and bear the costs of membership. It won’t be free, but it will have to compete on value. The treasury is acutely aware of this for big business already, and the solution is to make it more competitive on the backs of citizens. There’s no other way! The US budget is loaded with items marked ‘mandatory’ that taxpayers today will never see the benefit of. We all love the roads; don’t pull that canard. There are great honest values in paying for the common good. But those dollars mostly seem to end up on the balance sheets of the same companies that shift the burden onto citizens, and this system of value extraction is the entire reason why a little experimental protest called Bitcoin has any value at all. If the dollar had as much transparency as Bitcoin, you could see this happening in real time.
So please start your cryptocurrency regulation with actions that actually help people in this space. They want violent and exploitive criminals out. They want protection from hacks and rug pulls. They want secure asset custody. They want proven reserves. They want smart contract audits. Paying taxes could and should afford advantages well worth the cost. Think about it this way: if all agencies announced that they were going to stop all taxes and all contract enforcements for the equities market, what would happen? Absolute pandemonium. Zero liquidity. The biggest market crash in history over the next 10 minutes. Like all open source, the customers in crypto markets are building solutions to obviate those agencies out of necessity, not desire.